Franklin Cudjoe, the founding president of Imani Africa, has voiced concerns regarding the government’s Gold-for-Oil program.
In a tweet, Mr. Cudjoe stated, “The first Gold4Oil deal ended up with govt paying cash instead of gold.” This was after it was revealed that the government paid cash for the oil under the program. I hope this ambiguous “policy” does not result in an international catastrophe.
Dr. Maxwell Opoku Afari, the First Deputy Governor of the Bank of Ghana (BoG), stated that the Gold-for-Oil initiative has two legs.
The gold purchase program and the oil legs are the next two.
He stated, “What I know is that the gold-for-oil has two legs, it has the gold purchase program leg and then the oil leg,” when he appeared before the Public Accounts Committee of Parliament (PAC) on Friday, February 3.
The Bank of Ghana is fully involved in the purchase of gold, which results in the oil. However, we are aware that we have purchased and fully paid for gold, which is sufficient to support the oil transactions.
Earlier, Dr. Ernest Addison, Governor of the Bank of Ghana (BoG), stated that sufficient gold exists to guarantee the initiative’s success.
He stated, “We started this whole program to build reserves with the purchases of gold,” when he spoke at the 110th Monetary Policy Committee (MPC) press conference on January 30 in Accra. We have purchased 181, 435.25 ounces of gold, which is worth 248 million dollars, since the beginning. This is for reserves.
He stated, “593,000 just about 96.8 million US dollars” regarding the gold-for-crude initiative. There is sufficient gold. I am aware that Precious Minerals Marketing Company (PMMC) asserts that they have sufficient gold to support the deal.
Stephen Opata, the central bank’s Director of Financial Market, provided assurances earlier that the central bank could purchase sufficient gold to ensure the program’s continued existence.
This was what he said when he appeared in front of the Public Accounts Committee (PAC) on Monday, January 16.
According to the production figures we observed last year, gold has increased in quantity. We think we can buy enough gold to keep the program going.
“I must say that the figures we are currently looking at are approximately 160,000 ounces per month, which will account for approximately 50 to 60 percent of the country’s consumption. Mr. Opata stated, “I think we have volumes to support the program, according to what PMMC indicates.”
After Ghana received its first shipment on Sunday, August 15, Vice President Dr. Mahamdu Bawumia declared that the initiative was successful.
On Sunday, January 15, 2023, the 40,000 metric tons of oil arrived at the Tema port.
Plans for its distribution and sale will be developed by the Energy Ministry, the Bulk Oil Storage, Transportation, and Oil Marketing Companies.
Dr. Bawumia provided justification for the program in an address delivered on Tuesday, January 17, at the University of Ghana’s 74th annual new year school.
He stated, “How are we going to alter this entire business practice with regard to our natural resources?” Take gold in Ghana, where we have mined it for more than 200 years. However, when I looked at the data, I found that our total gold reserves in Ghana were just 8.7 tonnes at the end of 2021.
We are among the world’s top ten gold miners and one of the largest, but we haven’t accumulated enough gold to build up our reserves.
We looked at the balance sheet on the other side and saw that we import oil and export gold. Each year, oil imports cost approximately $3 billion. Since we have always been under pressure to purchase oil in US dollars, we ask, “Why don’t we reach an agreement to exchange our gold for oil, sell the oil in Cedis, use the Cedis to buy more gold, use that gold to pay for oil, sell the oil in Cedis, and then you don’t need to look for the scarce foreign exchange to buy oil?”
“We said, let us do something that the textbooks don’t teach you, let us do something out of the box, and that’s why we said gold-for-oil with this idea. Let us do something that is out of the box.” We looked at this quickly and negotiated with the oil suppliers, who were thrilled to receive gold as payment. Thankfully, Ghana received its first oil shipment as part of the gold-for-oil program yesterday, Monday.
“This is the cargo to test the framework to see if everything that has been put in place will work. By God’s grace, it is clear that the framework will work, and if that does happen, we are going to save a lot of foreign exchange and reduce the pressure on our currency,” the statement reads.
Ghana will save $3 billion annually on oil imports thanks to Dr. Bawumia’s earlier program, which will give the country more time to build up its international reserves.
In addition, he stated that, in the face of decreasing foreign exchange reserves, the use of gold was exclusively for oil imports.
Sadly, some individuals have misunderstood this to mean that Ghana opposes the use of the US dollar in international transactions, he stated.
“Not at all. In the future, we intend to increase our US dollar reserves.
Vice President Bawumia noted that the demand for foreign currency to finance oil product imports has been a major cause of the Cedi’s depreciation. To address this issue, the government is negotiating a new policy regime in which sustainably mined gold will be used to purchase oil products.
“We implement the gold-for-oil policy as envisioned; it will fundamentally change our balance of payments and significantly reduce the persistent depreciation of our currency with its associated increases in fuel, electricity, water, transportation, and food prices,” according to the policy’s implementation.
He said that this is because all domestic fuel sellers won’t need foreign currency to import oil products, so the exchange rate won’t play a direct role in determining fuel or utility prices anymore.
